FBI 'probes' ZTE trade deals with Iran

The FBI is investigating
Chinese telecoms equipment-maker ZTE over allegations it sold banned US
computer gear to Iran, according to a report.

An investigation by Reuters in March alleged that ZTE had provided products made by the likes of Microsoft and HP.

In documents obtained by the Smoking Gun website, a ZTE lawyer said company officials also discussed shredding material relating to the alleged deals.

US sanctions prohibit the trade of any non-humanitarian goods with Iran.

Reuters said that ZTE had sold Iran a surveillance system capable of monitoring landline, mobile and internet communications.

After the report's publication, ZTE said it would curtail its business with Iran.

'Monitoring citizens'

Ashley Kyle Yablon, the general counsel of ZTE's US subsidiary in Texas, made the comments during interviews with FBI agents.

Mr Yablon said ZTE senior managers discussed several measures
to subvert the investigation into the deal by the US Department of
Commerce.

Another major firm, Huawei, has caused growing unease in the West

He said he had also seen a "packing list" - a document
detailing items in a delivery, including hardware made by top US
companies such as Oracle, Cisco and Dell, worth in the region of $120m
(£80m).

In the original Reuters report, the equipment was described
by an unnamed former telecommunications project manager in Iran as being
"far more capable of monitoring citizens than I have seen in other
equipment".

Mr Yablon said he had seen an Iranian contract which outlined
"how ZTE would evade the US embargo and obtain the US-manufactured
components specified in the contract for delivery".

Mr Yablon told FBI agents that the Shenzhen-based firm "was
concerned about how the Reuters reporter obtained a copy of the packing
list... because it could no longer 'hide anything'".

On Friday it warned that its first-half profits could be down
by as much as 80%. The company blamed lower gross margins, foreign
currency exchange losses and domestic operator networks postponing their
tenders.

Brewing feud

The investigation will fan the flames of what is seen by many
as a growing dispute about the proliferation of Chinese electronics
companies across the world.

The European Union is investigating whether China illegally
subsidised several of its telecommunications companies - including ZTE -
to enable them to grow quickly and overtake the likes of Nokia and
Alcatel.

At a recent meeting to discuss the matter, Beijing warned
that if Brussels pressed ahead with its investigation, there would be
severe retaliation against other western industries such as motoring and
agriculture.

Huawei, the world's second largest telecoms manufacturer, has
faced allegations that its use poses a security threat, with attempts
to expand its operations in the US blocked due to supposed close ties
with the Chinese government and fears about possible surveillance
possibilities.

In Australia, the government cited similar security concerns
as it barred Huawei from placing a bid to provide very high-speed
broadband to almost every home in the country.

In response, Huawei has said it complies with all local and
international laws, and welcomed any investigation into its practices.

The company said accusations of how its technology could be
used to track and censor communications were "inaccurate" and
"groundless".